Global steam coal price forecast (January 2015)

This year, Metal Expert Consulting continues to publish open quarterly reports to share its understanding of the steam coal market development in a medium- and long term and compare it with the consensus forecast of investment companies and analysts.

Like in the coking coal segment, global prices for steam coal stabilized over the past months: the price for Australian 6,600 kcal/kg coal stayed at $63-64/t FOB Newcastle in Q4.

As the global energy market, including steam coal segment, faces some uncertainty, the industry analysts have different opinions regarding further development of prices. As of the beginning of the year, most investment banks have been expecting some increase in steam coal price. Macquarie Bank, Wilson HTM and ANZ have the most optimistic forecast (equal or close to maximum in the table below), while forecasts of Deutsche Bank, Capital Economics and Morgan Stanley are the most pessimistic. To prepare a consensus-forecast, Metal Expert has not considered the investment banks’ forecast published prior to December 2014).

Note: To get the forecasts, all available prices have been adjusted to a common benchmark basis – the FOB Australia price for 6,600 kcal/kg steam coal.

The comparison of actual price for steam coal in Q4 ($64/t) and the price we forecasted in the October report ($68/t) shows that we have underestimated the influence of the negative factors (macroeconomic developments, oversupply). Meanwhile, the error in the consensus forecast of investment companies is greater than that of Metal Expert Consulting’s (14% against 6%).

Comparison of steam coal price forecast accuracy of Metal Expert Consulting and industry analysts over the recent year

According to our estimates, in H1 2015 global price for steam coal will drop to its lows (to $61/t by the end of Q2) to recover afterwards.

The graph below shows comparison of Metal Expert Consulting’s updated export price forecast for Australian steam coal with the prices that investment and industry analysts expect (adjusted to the same basis).